Monday, October 08, 2007

What Marx called "contradictions" others call a belly laugh

David Seaton's News LinksThis is what it really is all about. The Chinese have all our debt and all our cash. They are about to spend the money they have earned and call in the loans they have made and either they can buy what they want and can get paid in full or the system will break.

I think future Chinese historians will call this "Capitalism-Leninism", and I think Vladimir Ilyich must be rolling in his mausoleum with laughter (when the tourists aren't looking of course). DS

Niall Ferguson: Small stakes for Bush-Brown-Sarko - Los Angeles TimesAbstract: In Kissinger's heyday, the president of the United States really was a potentate. Like his opposite number, the general secretary of the Communist Party of the Soviet Union, he had the power to kill tens of millions of people at the touch of a button. Even the British prime minister had real power in the 1980s: The power to send a fleet from Portsmouth to the other end of the Earth to expel invaders from the Falkland Islands. The leaders of the last generation had real economic power as well. Just over 25 years ago, the president of France had the power to nationalize the country's largest banks. It's not that today's politicians are inferior to their predecessors. It's their predicament that's changed. Not everyone sees this. Not everyone wants to see it. The news media, in particular, depend for their very existence on the notion that politicians are powerful. The politicians need the media to publicize their activities. No one understands this better than the new French president, Nicolas Sarkozy, whose whole life has become a performance for the benefit of Paris Match. We are told that Sarkozy is pondering a fundamental realignment of French foreign policy. Perhaps, after more than 40 years of semi-detachment, he will take France back into NATO's integrated command structure. Perhaps, after more than 50 years of attachment, he will loosen the ties between France and Germany.(...) From the mid-17th century until the mid-20th, relations between Britain and France truly were of vital importance to the stability of the world. Had it not been for Anglo-French conflict, the U.S. might have been suffocated at birth. Had it not been for Anglo-French cooperation, the German Reich might have conquered Europe. France, Britain, America: They each have had their era of hegemony. Now, however, they all belong to the club of developed debtors, with combined current account deficits of $970 billion last year. Other members of this club are Australia, Greece, Iceland, Ireland, Italy, New Zealand, Portugal and Spain. Apart from Iceland, it reads like a list of ex-empires, with the former members of the British Empire (energy-rich Canada excepted) in the lead. Collectively, the developed debtors had to borrow about $1.3 trillion last year. On the other side of this great global equation is the club of emerging exporters. According to the International Monetary Fund, more than 40% of the developed debtors' funding requirement last year was met by China, Russia and the Middle East. The problem for the deficit countries is essentially that their people think the world owes them a living. Their politicians pander to this assumption by making a series of more or less incompatible promises: that expenditure on healthcare and education will always go up; that direct taxation will never go up; and that the assets against which voters borrow will never go down. The only way to fulfill these promises is to pump out ever more printed paper: bank notes, bills, bonds, stocks and the rest. The emerging exporters buy these. The net result must be a creeping transfer of financial ownership from West to East. This process is about to enter a new phase as China establishes its own sovereign wealth fund to join those operated by the likes of Kuwait, Abu Dhabi and Singapore. According to Morgan Stanley, these funds manage about $2.6 trillion. In 15 years, their assets could reach $27 trillion, giving them control of nearly 10% of total global financial assets. So the big question is not whether Sarkozy or Brown will get along better with Bush, but what China's sovereign wealth fund will buy when it embarks on its first investment spree. READ IT ALL